NCI sees improved outlook, some organic growth in 'rebuilding' year
By
Ross Wilkers
NCI sees a return to organic growth for the first time since 2010 as IT contractor continues year its CEO says is one of "rebuilding."
New business wins may not be in the cards for a struggling NCI this year but existing work already on contracts gives the government IT contractor an improved outlook for 2017 as it goes forward on a long-term turnaround strategy.
In first quarter earnings posted Tuesday, Reston, Va.-based NCI bolstered its revenue forecast to a midpoint of $333 million from the prior $324 million to suggest roughly 3-percent growth and represent its first organic sales increase in six years when excluding acquisitions. NCI’s sales guidance range for this year is $324 million-$342 million compared to the original $311 million-$335 million outlook issued in April.
Even with that bolstered range, CEO Paul Dillahay cautioned this “is a rebuilding year for NCI” during the company’s earnings call with investors Tuesday. Dillahay also repeated many of the same themes he views as key to the turnaround from the last conference with analysts in April, namely its business development pipeline.
In particular, the focus on rebuilding NCI’s BD functions is a “12-to-18 month cycle” that started upon Dillahay’s arrival in October of last year, he told investors.
“We're six months into it and probably have another six-to-12 months before we begin to see real material sustainable benefit from it,” Dillahay said to analysts on the call.
NCI lifted its guidance in part on work related to the company’s task order for agile development services to the U.S. Citizens and Immigration Service. Dillahay told investors NCI also sees higher volume related to the company’s two largest contracts: PEO Soldier and CNOSS from the U.S. Army.
“It is not competitive task orders that we're winning on those two programs. This is specific to the mission of that customer and experiencing some incremental funding and work to be done and we're supporting that,” Dillahay said.
Wall Street has welcomed the bolstered outlook as shares in NCI have traded up 9 percent since Tuesday’s closing price of $14.55. The stock has also set new 52-week intraday highs along the way.
Potential acquisitions are still in the cards for NCI as they are “certainly part of my mandate,” Dillahay said in a similar vein to his April comments that signaled a continued openness to deals.
“But right now we’re focused on and here to talk about organic growth. Then obviously we continue to evaluate M&A opportunities as they come up,” he said.
On the pipeline front, NCI business development leader Bridget Medeiros told analysts on the call the company will bid $1.7 billion this year on 70-80 jobs. The following year will have the same dollar amount of bids "with about half of the jobs we did this year," she said.
NCI did include one relatively downbeat item in their first quarter earnings statement. Costs related to the alleged embezzlement of company funds by former controller Jon Frank totaled $6 million in the quarter versus NCI’s original $5 million estimate.
No new developments related to the government investigations, NCI’s civil lawsuit against Frank or efforts to recover the funds in question came out of the latest financial report.
The company alleges Frank embezzled $19.4 million over six years.